China’s Banks Rally Most Since March 2009 on Li Growth Comments

July 11 (Bloomberg) -- China’s financial companies rallied
the most in four years on speculation the government will take
more steps to ease a credit crunch and prevent economic growth
from slowing below official targets.

A gauge of banks, brokerages, insurers and developers in
the CSI 300 Index gained the most since March 2009, when a
global financial crisis roiled markets. Industrial Bank Co.,
partly owned by an HSBC Holdings Plc unit, and Ping An Bank Co.,
a unit of the second-largest insurer, jumped 10 percent. China
Life Insurance Co., the biggest insurer, and Citic Securities
Co., the largest brokerage, gained at least 6.5 percent.

Premier Li Keqiang said in a July 9 speech that economic
growth and employment must stay above a certain floor, the
official Xinhua News Agency reported. Li is feeling more
pressure as economic data continue to weaken and risks to the
7.5 percent growth target increase, Zhang Zhiwei, chief China
economist at Nomura International (HK) Ltd., wrote today.

“Banks are rallying on hopes that Premier Li’s comments
will help to ease the liquidity shortage and the government will
take measures to support the weak economy,” Tang Yayun, a
Shanghai-based analyst at Northeast Securities, said by phone.

The statistics bureau is scheduled to publish data on
second-quarter economic growth on July 15. Growth may have
slowed to 7.5 percent from 7.7 percent in the first three
months, according to the median estimate of 34 economists in a
Bloomberg survey.

Li Comments

As long as the “economic growth rate, employment and other
indicators don’t slip below our lower limit and inflation
doesn’t exceed our upper limit,” China will “focus on
adjusting the structure, promoting reform and pushing forward
economic transformation and upgrading,” Li said July 9 at a
meeting in Guangxi province, the official Xinhua News Agency
reported. He didn’t elaborate on the limits.

The financial sub-index has fallen 6.3 percent this year,
dragged down as its 52 companies sank to an average price ratio
of 6.7 times estimated earnings on July 9, the lowest level
dating back to at least 2007, when Bloomberg started tracking
the data. Chinese bank stocks plunged last month as surging
money-market rates signaled a cash crunch was worsening.

The seven-day repurchase rate, which measures interbank
funding availability, surged to a record 10.8 percent on June
20, and averaged 4.49 percent last quarter, the highest since
the National Interbank Funding Center started compiling the data
in 2003.